Financial Management

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National Institute of Business Management

Chennai – 020

FIRST SEMESTER EMBA/ MBA

Subject: Financial Management

 

Q.1.        Explain the Indian Financial Systems.

Ans:- The term “finance” in our simple understanding it is perceived as equivalent to ‘Money’. We read about Money and banking in Economics, about Monetary Theory and Practice and about “Public Finance”. But finance exactly is not money, it is the source of providing funds for a particular activity. Thus public finance does not mean the money with the Government, but it refers to sources of raising revenue for the activities and functions of a Government. Here some of the definitions of the word ‘finance’, both as a source and as an activity i.e. as a noun and a verb.

The American Heritage® Dictionary of the English Language, Fourth Edition defines the term as under-

1:”The science of the management of money and

Q2.Explain debentures as instruments for raising long-term debt capital.

Q.3.what is Working Capital Cycle? Discuss.

Ans: – The working capital cycle (WCC) is the amount of time it takes to turn the net current assets and current liabilities into cash. The longer the cycle is, the longer a business is tying up capital in its working capital without earning a return on it. Therefore, companies strive to reduce its working capital cycle by collecting receivables quicker or sometimes stretching accounts payable.

Discuss:-

The working capital cycle is the time that elapses between investing in a product or service and receiving payment for that product or service. The starting point of the working capital cycle is usually when the business purchase raw materials or hires people

 

Q.4.what are the characteristics and uses of ratio analysis? Explain with examples.

Ans: – Ratio analysis:- Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items in financial statements like the balance sheet, income statement and cash flow statement; the ratios of one item – or a combination of items – to another item or combination are then calculated. Ratio analysis is used to evaluate various aspects of a company’s operating and financial performance such as its efficiency, liquidity, profitability and solvency. The trend of these ratios over time is studied to check whether they are improving or deteriorating. Ratios are also compared across different companies in the same sector to see how they stack up, and to get an idea of comparative valuations. Ratio analysis is a

 

Q.5.        Explain how you will estimate cash flows.

Ans:- cash flows:- Cash flow is the movement of money into or out of a business, project, or financial product. It is usually measured during a specified, limited period of time. Measurement of cash flow can be used for calculating other parameters that give information on a company’s value and situation. Cash flow can be used, for example, for calculating parameters: it discloses cash movements over the period.

  • To determine a project’s rate of return or value. The time of cash flows into and out of projects are used as inputs in financial models such as internal rate of return and net present value.
  • To determine problems with a business’s liquidity. Being profitable does not necessarily mean being liquid. A company can fail because of a shortage of cash even while profitable.
  • As an alternative measure of a business’s profits when it is believed that accrual accounting concepts do not represent economic

 

Q.6 Explain Performance Budgeting.

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